3 ms·
I urge you to try the exercise and determine either the discount rate you need to use to get reasonable future valuations or the valuations you get with a reaso
by mcguire 6y ago
I urge you to try the exercise and determine either the discount rate you need to use to get reasonable future valuations or the valuations you get with a reasonable discount rate.
- aeternum 6y agoSure, let's look at FB. AA corp bonds are around 2%, so let's use that for the discount rate and assume Fb maintains their 40% growth for 3 years then transitions to 10% for 7 years. Cash flows per share would be just under $50 during the growth period and just over $200 during the stability period. Basically 10 years to break even with the current share price. Not very far out of line with historical PE ratios.